The Canadian economy is well placed to adjust to the major changes underway in the world economy, Bank of Canada Governor David Dodge said today. While Canada has adopted the right policies to allow its economy to adjust to changing forces, it should continue its efforts to prepare for new opportunities and challenges, the Governor said.

In a speech to the Hamilton Chamber of Commerce, Governor Dodge noted that the integration of countries such as China and India into the world economy and a realignment in world currencies have changed the global economic environment. "The world economy has undergone tremendous change in recent years. And we can be sure that there is more to come."

The Governor spoke of the progress Canada has made—and must continue to make—in improving its economic policy framework. "While we Canadians can remain confident of our ability to adjust to change, we must not be complacent. We should continue to work at strengthening our macroeconomic framework, enhancing our productivity, and opening up further to trade," he said.

Regarding Canada's economy, Governor Dodge said that the level of output is still significantly below the economy's production potential. However, both final domestic demand and exports grew strongly in the first quarter. These indicators, along with more recent data, suggest that growth in the first half of 2004 is likely to be somewhat above 3 per cent.

The Governor noted that in its April Monetary Policy Report, the Bank projected average annual growth of about 2 3/4 per cent in 2004, and about 3 3/4 per cent in 2005. He said that while higher oil prices may mean that total inflation over the next several months will be higher than the Bank expected, there should be little impact on core inflation, which is still expected to move back up to 2 per cent by the end of 2005.